Should you subscribe to the IPO of RailTel?

| Updated on February 18, 2021

At a range of Rs 93 – Rs 94 per share, RailTel's shares are priced at approximately 23 times its annualised FY21 EPS. This is based on earnings per share for the first half of FY21 after adjusting for a one-time exceptional expense. This is not cheap given the growth of its earnings in recent years and its relative premium valuation vs the PSU universe. 

Its dividend yield at the IPO price of around 2 per cent is also not attractive. Even when compared on an EV/EBITDA basis  — RailTel trades at around eight times annualised FY21 EBITDA (adjusted) versus larger private companies such as Bharti Airtel trading at around nine times.  

RailTel is an information and communications technology infrastructure provider and one of the largest neutral telecom infrastructure providers in India. It also generates additional revenues by laying optical fibre cables using its ‘right of way’ along the tracks.  

RailTel is a debt-free company.  

So, should you subscribe to its IPO?

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Published on February 18, 2021